We Saw “$61/SF” And Said “Hold My Hard Hat”

A vacant industrial box, a rare laydown yard, and a seller on a tight clock—this is the kind of deal that tests your underwriting, your discipline, and your speed. We take you inside a 20,000 SF warehouse marketed at $61/SF and explain why we priced it off a 16,000 SF “real” floor plate, how the 2.3-acre yard became the make-or-break feature, and what we did in 24 hours to de-risk the contract. From helical piers and roof warranties to electrical panel surprises, we show how to separate cosmetic noise from structural truth.

We walk through a compressed diligence timeline—35 days to inspect, 25 to close—and how lending drives the schedule more than the building does. You’ll hear how we tackled environmental concerns: an old underground storage tank without a clear no-further-action letter and asbestos in floor materials that can be managed through encapsulation or a targeted $25k remediation. We also detail the renovation game plan: fixing a damaged 13-by-13 roll-up, repainting for curb appeal, opening office mazes into efficient, comfortable layouts, and upgrading the break room and entry so teams actually want to work there. With 18–20 foot clear heights, ample three-phase power, and even a powder coating booth, the property sets up for flexible uses and potential micro-revenue streams.

On the numbers, we targeted market rents near $9–$10 NNN while stress-testing a $7 downside that still pencils strong cash-on-cash after stabilization. We explore why the yard supports rent resilience, how plumbing camera scans and line mapping cut TI costs, and why most tenants choose smarter layouts when shown the budget impact. Financing a vacant asset is never easy, but a supportive lender, 80% LTV, and a tight spread over the five-year Treasury turned urgency into momentum. If you’re serious about commercial real estate investing, this breakdown offers a practical blueprint: buy the footprint that truly leases, fix the expensive unknowns first, and design for speed to occupancy.

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Transcript

Blue Dirt Mission And Focus

Michael Carro 0:00

Welcome to Blue Dirt, the podcast that digs deep into the foundation of commercial real estate investing. Unlike most real estate shows that focus on deal making and market trends, Blue Dirt gets into the nuts and bolts of what truly builds long-term value, the building itself. We break down how to spot deferred maintenance before it costs you, why a solid preventative maintenance program is a game changer, and how triple net leases can maximize your investment returns. We'll also explore the importance of strong landlord-tenant relationships and how they drive stability and growth in your portfolio. Whether you're a seasoned investor or just getting started, Blue Dirt gives you the practical knowledge to make smarter, more profitable decisions in commercial real estate. It's time to get your hands dirty and build value from the ground up. Let's dig in. Welcome to Blue Dirt, where even idiots can make a killing in commercial real estate. I'm Michael Kierow with SVN South and Commercial Real Estate, joined by Don Ruddhead with Blue Commercial Properties. Well, today we're going to talk about a deal that is fresh, fresh, fresh. Um, Don, why don't you create the setup since you're the one who kind of uh forced me into this situation?

Finding The Listing And Market Scan

SPEAKER_01 1:14

Uh yes, forced your hand. Um starts like most situations. Uh you find yourself, and we've talked about this in the past, where you just you always want to be looking at what's going on in the market, whether it's because you have you know your own real estate that's sitting there that's either you know, maybe not doing so well, overperforming, maybe it's been vacant a while. So you're just always looking at the market, also looking just for maybe potential other opportunities or to see hey, how is the market trending in general? So there I am, just perusing online. I think this one was on uh Cruxy and you know looks in a good location, uh found a more industrial, right, type property, good price per square foot. It had some data in there that that maybe wasn't, I don't want to say there's it was inaccurate, but it just we weren't perceiving it. If we're trying to be fair with ourselves from releasing it, uh it was maybe overinflating the square footage a little bit, but we wanted to get in and see it. So there's a property found, sent it to you, um, and that kind of gets our ball rolling, but always looking at what is on the market, what is out there, what's available, even if you're not ready today, just to see what's what's happening is is just best practice.

Property Specs And Pricing Reality

Motivation, Days On Market, Leverage

Michael Carro 2:40

So in the last several months, I've actually purposely not looked for properties because I go through phases where I'm just perpetually broke. And I'm in one of those phases where I'm like, you know, I just had the tax man come take all my money. And so I'm kind of licking my wounds, saying, all right, time to rebuild. And so I'm not looking at real estate because I don't want to focus on it, because I'm I'm like a crackhead. I am addicted to my crack is commercial real estate. And so when I find a good dealer, and Donnie, he has taken on the role as my dealer. Uh, I just can't say no. He's got some great product here, man. He's got some great product. So what happened was um I look at it, I'm like, uh it's interesting, you know. Uh I wasn't really biting off on the price per square foot. And we're gonna give you all the details. So um it's a roughly marketed as a 20,000 square foot uh industrial property warehouse. Um it sits on, you know, about 2.3 acres of of land, so a nice amount of laydow area. It has some interesting shed styles uh that are maybe 10 foot deep by 100 foot long, but open face. It has a roof, it has a back, there is a gap in the back. Um, but again, they store what raw material in those, stuff like that for their maintenance. Raw material type storage. Um so so you know, let's just go take a look at it. And um so we get out there, it's block construction. Uh, we find out that there is a new roof on there. So that's always a big deal for us because you know, we do not believe in deferred maintenance. So whatever we buy it for, we're gonna go in and take care of it and and spend a lot of money up front. But a roof is something that we seem to always have to replace. And so this is already done, so that's already a big deal. And because it's industrial, the air conditioning is not as big of a concern. Yes, we may have to replace it, but but you're only replacing it for the office portion. So that's typically not a huge expense. Um, and so everything else, industrial is just so simple for the most part. So that's why we like it in general. And so it was being marketed at an asking price of about$61 a square foot, which is really, really attractive. Right now in our market, the rates for industrial properties are about$100 a square foot. So, right off the bat, sounds good. Um, but for me, the factor is it has a decent amount of square footage on the second floor. And to me, I give no value to that. Not that it does, it wouldn't potentially have value to somebody, but when I'm underwriting it, I'm like, what is the easy sell? And so we're really dealing with maybe about a 16,000 square foot floor plate versus 20,000. Okay, well, then of course that makes it higher. So, anyways, but it was really the laydown area. When I look at the market right now, we've got some great industrial properties on the market that are much better than this property. However, they don't have any laydown area. And so there are some users that have to have laydown area, and that's just a veto vote. And we're always looking for how do we get away from certain veto votes? And one of these is laydown area. So this has a significant amount of laydown area. And so that's kind of what attracted, you know, me to it. And um, and so after Don and I made the initial review, you know, I just threw in an offer. The asking price was 1.2. I think I offered 765,000 because I didn't care. Um, well, let me also, we found out uh what we think is a motivational factor, you know, that we kind of backed into. You want to talk about that?

SPEAKER_01 6:32

Yeah, it was owner occupied. Uh, and during the site visit, they're sharing, hey, you know, they're just leaving because they already have a a new home that's virtually done and they're getting ready to move in.

Michael Carro 6:45

So, yeah. They're they're three months away. Yep. And three months away in our world, well, most due diligence is 60 days and closing is 30. So it kind of lines up, you know.

SPEAKER_01 6:57

So now they're gonna be transitioning into their new home, right? And what they're gonna have to do if they decide not to to seize this opportunity is carry this cost, you know, through however long it could be. And it sounded like something they had also shared was they actually had a couple other good offers that had come in, but for whatever reason, even full one of them was full price urine. That's correct. Yep, that's what he had shared with us. Uh, they were unable to seize on those opportunities for whatever reason, but now really we're coming to the to the deadline as far as if they want to get under contract, if they want to close on time, then they're not gonna have to carry the cost of at least you know how many months of unknown vacancy uh of two locations now.

Structural, Electrical, Roof Findings

Michael Carro 7:42

And this has been on the market for 190 days, so it's not like it's just came to market. So it's been on the market, it was under contract twice. Um now there's a little bit of there's a fly in the ointment, and and we're gonna talk about the environmental concerns that at least one of the groups that had under contract, because we we in the past 24 hours we've done a massive amount of research. And so we're gonna talk about what the last 24 hours has been like, just so you're aware. Um so uh they counterback, we go back and forth a little bit and land on a price of$935,000. Okay. So, you know,$265,000 off the ask. The ask was not an unreasonable ask. It's just that when I did the math, uh and and I so I took the$935,000 and divided it by what I consider the the the right square footage without the second floor. Okay. And that gets us to a price of almost the same that they were asking for with the second floor on a price per square foot. So it got us to$59.40 a square foot. Now, if you go to the total square footage, it is$48.12. So we we we basically got it for$13.64 less a square foot than what they were asking for. So, anyways, that's some of the details. But um, but during our walkthrough, you saw a couple of things, Don, that you had questions about that we ultimately got answered within the past 24 hours. What were your what were your immediate concerns?

SPEAKER_01 9:21

Uh the thing you you touched on quick, right? AC wasn't a big concern. Uh limited office space. Yeah, they're old. It's not like we're conditioning the whole space. Of course, if someone showed up, said I need climate-controlled warehouse and it's a and it's a credit tenant, we'd probably figure that out. But you know, what they had in place wasn't a big issue. Plumbing, not really a concern. Um, the two things that jumped out to me as we're walking through this space is some of the electrical looks rather old. Um, so something you have to be mindful of is depending on the brand of the panel and the age of the panel, it can come back to bite you with um your insurance. So don't know a lot yet, but it's something I'm gonna pay attention to when the electrician comes out.

Michael Carro 10:07

It has massive amounts of electricity. So the interesting thing is, is yes, it's got some old panels, but we're talking it probably has 15 different panels. Yeah, it's got because the building kept getting added on to, and and there has there's a lot of uh, you know, kind of manufacturing uh going on. So it seems to have some massive panels. So even if one or two panels is is old or whatever, it's not like it's a big deal. You can change those out. Yeah.

Compressed Due Diligence And Lending

SPEAKER_01 10:36

But you know, so that was one thing, right? And then the second thing was is around the building, there was a couple corners, uh, and we had to, you know, like like everything, you learn the hard way. Uh, you can see some of the stair-stepping cracks in the block, which typically tells you, especially here, with the type of soil, the amount of of rain um that we'll get, sometimes these footers will wash out and you have to put um braces underneath them. They'll call them um helical piers to stabilize that footer from sinking any further. So those were kind of two things that that jumped out to me immediately.

Michael Carro 11:13

And and I'm just gonna reinforce during the block construction, you got the corner of the wall. And as Don was mentioning, there's a cracking that follows the imagine the corner of a block wall starting to sink. So it creates this separation, and they're shown in hairline cracks that kind of, as Don said, look like they're stair stepping down. So he indicated that to me. I never even saw this because you know he's definitely more uh in tune with seeing that stuff because he had he's the one who has to go out and get it repaired later. So he has a great knowledge of that. So he mentioned it. And in the due diligence reports that I received prior to getting under contract, I didn't really think about it, I didn't study it, but but when he mentioned it, I said, hey, I've got a report that they uh either an invoice or something that was paid that shows that they did helical peers. So when we went out the next day, which was yesterday, um we asked, and sure enough, the area that he had a concern about was just done four months ago. So his concern was spot on, you know, and we had the invoice and the backup data to support it. So that is no longer a concern. In addition, they have a brand new roof that um was gonna come with a full warranty as well. So those are some big things there that were taken care of.

SPEAKER_01 12:30

And something else they shared with us as we were walking through, uh, once again, the electrician, when we have them out, are ultimately gonna be the ones verifying this. But he goes, Oh, yeah, those old panels, they just haven't been removed, but they're not active.

Michael Carro 12:43

Oh, is that right?

SPEAKER_01 12:44

So, yeah, a lot of these old uh panels that were there that that were, you know, the ones I was concerned with, they uh they're actually not working. They're they're discontinued. That's why this brand new panel is right next to it.

Environmental Risks And Mitigation

Michael Carro 12:55

Oh, so okay, gotcha. Well, that was kind of interesting. New information. This is, I mean, this is all brand new, fresh stuff. So so one of the things that they pushed back on, which which I agreed to, but it does make me have to jump through a lot more hoops faster. We can do anything as long as you have a good banker in tow, and we do. So um, they dropped our due diligence down. A normal due diligence on commercial property is 60 days. They dropped it down to 35, which is kind of fast. It's not a house. A house is much easier to close on. Commercial real estate, a fast closing is typically a 60-day due diligence period, due diligence being the inspection period, and then another 30 days to close. And so now we have a 35-day due diligence period and 25 days to close. Why is that important? Don can do his evaluation in five days. I mean, so it's not about the facility, it's about the lending. So the time for everything for inspections is all about the lending. Lenders need to order appraisals. The appraisals can take a while. The um we've got to get a survey. The title report is easy. Um, in this case, we've got to do some environmental inspections. We've already in I already ordered an inspection report that I can get online and I already turned that over to my lender. Um, but there is asbestos in one of the buildings. We have an asbestos report. Again, asbestos is not bad as long as it's properly encapsulated and it's in the flooring material. So a lot of buildings have it. You walk on it every day. It's only if you go to cut it or disturb it that it becomes a problem. So I'm not exactly sure how the lender is gonna react to that. I mean, a lot of buildings have it, but but that's always a concern. And then there was a UST, uh underground storage tank that was removed in 1989. Well, they don't have, they have not provided a no further action report, you know, from the Department of Environmental Protection or whoever's gonna issue that report. Now, on the environmental report we purchased overnight, um, it does show that there is a NFA or it's been closed out, no further action or it's been closed out. But I don't have the data. So right now, I'm working hand in glove with the other side to uh reach out to these agencies to provide that data. And then once the NFA comes in, that will be take care of that. Then it's the asbestos thing, which I really don't know how they're gonna respond uh to that.

SPEAKER_01 15:30

Um if we Unfortunately, they at least I haven't seen the report, but he did say they had gotten a survey to remediate it and it was like whatever amount.

Michael Carro 15:38

I don't even know. I didn't look at it.

SPEAKER_01 15:39

I thought he said 25.

Michael Carro 15:40

This was verbal.$25? Uh let's just do that.

SPEAKER_01 15:45

Yeah. A couple sandwiches.$25,000.$25,000 to remediate.

Capex Plan, Office Flow, Power

Michael Carro 15:50

Okay, so now at least we know what the remediation is. If we were, number one, if we wanted to renovate the flooring, or if the bank says, hey, I'm not gonna give you the loan without remediating. So either way, we've we know this$25,000 number exists. Still is gonna work with our model. This building we don't feel like needs a lot. We've allocated$100,000 for renovations. It doesn't really need much, but we know we needed a roll-up door. There's a 13-foot-wide by roughly 13-foot high roll-up door that is damaged. Two grand, right? We would want we want to paint the building. Um, overall, it looks good, but this is a really nice looking uh block construction. So uh definitely want to. It's a nice brick facade. Has a great brick facade, yep. And so it's kind of moving fast. So, what have we done in the past 24 hours? I ordered the survey today. I've selected the the lender today. The lender has to go out and get appraisals uh reports, and we likely will have to pay an expedited fee for a faster appraisal. I uh my banker really helped us out. Um they offered, you don't even know this yet, but they offered a 75% loan to value. Uh I wanted 80%, which means we put 20% down, not 25%. He has agreed to that. And he came in at 225 basis points above the five-year treasury, which today is 6.07%. I asked him if he can do 210, and he's agreed to that. So that puts us below uh six. And um, and and by the way, these are high risk uh loans for these lenders. So they're they're not as property driven as they are going to be borrower driven. And thank God we have a strong track record uh with a lot of performing assets. So uh that shouldn't be an ass uh an issue for them. So so really everything's kind of moving so fast. Um, and so what are the next steps, Don?

Plumbing Mapping And Tenant Fit-Out

SPEAKER_01 18:02

As far as what I'm working on currently, I have uh set up tentatively for Monday HVAC inspection. We still want to get it inspected, you know. Um, just have a good report, age, history of those units. It does look like there's two units servicing the office area and then a small mini split. Uh, like I said, electrical. Electrical is lined up. I'm waiting to hear back from um our I'll say our structural and kind of moisture consultant, just because he's even better than than us. So he may see something that that we didn't see, uh, as well as as the plumbing, uh, which is technically two separate ones. We'll probably have the the drains camered and uh as well as have the plumber just look at the the hot water here, look at the lines, see what see what we're dealing with. Should we need to do any modification to the space? And then um really the next part, this one's a little unique that we've discussed is we're getting the the floor plan done, the Kuba Casa is is you guys use it a lot more than than I do, but we're gonna go through and I'm gonna say probably identify some areas that we're gonna clean up kind of immediately.

Michael Carro 19:12

Um it's and and what he means by that is we're gonna create a floor plan for the office spaces. When we were going through there, it felt a little bit like a maze. And the way we like to design these is uh, and again, this is just how we talk. Uh, we design it for if if my wife would go in and say, Yeah, I can work here. You know, that's kind of our metrics, not whether Don and I can work here. We don't care. But women tend to want to work in a cleaner, more comfortable workspace. And so we want to create it for them. And if we create it for them, the guys are automatically gonna like it. But but so that's what we go in. And so we want to make some of the rooms so when you do the floor plan, you can say, Oh, this wall, it's a lot easier to see it from a from a two dimensional than being in a space. So we can look at a A floor plan and say, okay, you know what? Look at this wall. If we take this wall out, it's a it's it's a natural flow. And so we might go ahead and take out three or four, maybe five different walls that really make the space more logical and feel good. Uh, we will also like to make upgrades to the break room. We know that that's an important space within within an office. And certainly the front desk area, you make that really inviting because that's the first look for the um for the tenants' customers coming in, especially if they're service related. So those are the types of feel-good things. The building itself is the one of the reasons why we love industrial is they're so simple. You know what I mean? Um, as guys who work in warehouses, it's it's just four walls. Does is it the right ceiling height? And that ceiling height is pretty good. What is it, Don? Do you think 18 feet?

SPEAKER_01 20:51

I was gonna say 18 to 20, yeah.

Michael Carro 20:53

Yeah. So it's got a good ceiling height, um, got plenty of three-phase power to accommodate whether it's a warehouse or manufacturing. It's got a lot of power.

SPEAKER_01 21:02

A giant C and C machine in there now.

Underwriting Rents And Returns

Michael Carro 21:04

Right. Now that's good. They're gonna take that. But he's just saying the power is there for it, right? Um, what's also interesting is it has a booth for um uh powder coating. So we think that there could be an extra opportunity for the powder coating community to come in there and use that, rent it out. And uh that would be another uh rental stream for the landlord. And then finally, all of these shed style uh buildings. You know, if a main tenant doesn't take the entire space with the 2.3 acres, well, then we can bifurcate out the space and lease it out to several different tenants. So really excited about the opportunity here. And again, these are considered high risk because we're getting it vacant and banks don't like vacancy, uh, neither do we, but um, but we've made a uh a history of buying high-risk buildings and have had success over the years. Yeah.

SPEAKER_01 22:00

Yeah, the only thing that as I'm pondering a little more that I do want to get addressed is probably the landscaping. I really want to clean up a lot of the trees around there because it just it feels like it's it's so hidden I didn't even realize it was there until recently. Right. You know, so um really showcasing, especially once we clean it up, paint it, it it should really show uh well.

Michael Carro 22:23

Right now, uh going back to the plumbing, when you do the cameras, do you do you create a um a mapping of of of the drain system?

Wrap-Up, Next Steps, Subscribe

SPEAKER_01 22:32

Yeah, we used to knot it, and it's it always came back to bite us, so now we do. What they'll do is um they will take the camera head and there's a sensor in the camera. So what we're doing is is two things is where we're at, there's a lot of what's cast iron, a lot of old cast iron. So they're gonna camera the cast iron, make sure there's not a belly, make sure there's not um uh as cast iron rust, what it'll do is create barbs, and those barbs will, of course, grab paper product and and and build up over time. So we're looking to make sure both of those uh aren't happening. There's solutions if both happen, right? You know, you can line it, you can also um they'll go through and they'll they'll basically knock the rust off um to clean it up so it doesn't have any issues. Uh the other part that they'll do is is with that same head, it has that sensor as saying that they'll walk as they're running it, they'll walk over it and they'll scan it and it'll ping back and they'll be able to read as they're scanning, hey, the head's in this area, here goes the plumbing this direction. And so why is that important for the future? Uh it's important because so many times we need to know where the plumbing is going because a tenant goes in there and they have a different need. So they're they're wanting to modify it. And if we know in general, hey, I have two plumbing lines uh colliding here, it's going out. Here's the main, it's connecting. You know, that's a pretty simple uh why. We know that, hey, if you want to add something, this is the general area as we design the floor plan. It should be relatively close to this because it's gonna be uh, and I'm gonna use this example at most commercial industrial, it's it's gonna be on a slab, so it's less saw cutting, right? So it's less repo on the concrete, it's less for the plumber to add. So you can get some significant cost savings instead of you going, oh, well, I'll drop it over here.

Michael Carro 24:33

Uh just like I've got to simplify what he's saying. You get a new tenant in there, they're like, hey, listen, we want to put a restroom right here. And we can do whatever you want, but when we know where the floor, when we know where the plumbing lines are, we're gonna say, hey, listen, I know you want it there, and we can put it there. But it might be it's gonna cost you X dollars. But if you put it over here, which is maybe 10 feet, 20 feet, 30 feet away, but it still works for your, well, you can save$10,000,$15,000. Your choice, because it's gonna be your money ultimately, even if, even if the landlord pays for it, we're gonna charge it back an additional rent. So we we'd like them to know what their options are. And most of the time, unless they have a very specific need, they choose the lesser expensive option. We want we want our buildings to be as cost effective for our clients and tenants. And so, because then their success rate typically is higher.

SPEAKER_01 25:24

Yeah.

Michael Carro 25:25

Yeah.

SPEAKER_01 25:25

Almost of the ones we've ever done, it it's like 98% of the time, they are going to choose the the more cost-effective option. Very few say, hey, no. And and the ones that do it, it is very, very purposeful and part of their business model that they're saying, no, it has to go here because of X, Y, and Z. It's about efficiency for their operation and just you know, pieces of equipment or customer experience, whatever it is. But almost every time they're gonna say, yeah, that makes a lot of sense.

Michael Carro 25:55

All right. So let's talk. Um, let's finish up this segment with uh return on investment. So quick analysis. Um the market for industrial property right now in our area is about$10 a square foot plus triple net. Now, I will tell you the last couple months have been pretty soft on industrial. Now, even though our industrial vacancy is really low, like below 4%, um, the last few months have been really soft on getting uh leases done. However, so in the modeling, you know, I I just said, listen, uh, if we were to model it at$7 a square foot for the base rate, not including the extra buildings and certainly not including the shed buildings, I believe the cash on cash return on investment is going to be about 28%. Now, this does not account for vacancy. That's assuming once we get at least up, you know, so if we go a really long time, that that percentage drops down. But it also, if we're not going to go out to market at$7 a square foot, I mean, we're gonna go out to market at, you know, probably nine,$9.50 a square foot. I'm just saying if if if if everything went to hell in a handbasket, we still have the ability to go down to$7 a square foot and still make a really good return on investment. Um, I think this laydown area is the game changer. And so, you know, the$9,$950,$10 a square foot is absolutely doable for this property. Now, we have to find the right tenant to make this happen, but I think that there's a great opportunity. So the return on investment is what we're excited about, but we have to get through some environmental issues, we have to get through our vacancy issues, and we got to get this thing financed. So that's the bottom line.

SPEAKER_01 27:45

Is that the new tagline? No. Okay. Not like it. Yeah.

Michael Carro 27:49

So uh a lot of work. Yeah. A lot of work. And so we'll send you some updates and you know, maybe at some point we'll we'll have Adam include in the notes, you know, photos of the buildings before and after things that was were done.

SPEAKER_01 28:04

Um, that's a good idea. You know, just uh You really should have thought of that.

Michael Carro 28:07

Yeah, Adam. Come on, get with it. So Adam is our producer. Uh, but anyways, that wraps up another episode of the Blue Dirt podcast, where even idiots like us can make a killing in commercial real estate. That's a wrap for this episode of Blue Dirt. We're here to help you build smarter, invest wiser, and create long-term value in commercial real estate. One solid foundation at a time. If you found today's insights useful, be sure to subscribe so you never miss an episode. And if you know somebody who could benefit from these discussions, share Blue Dirt with them. Got questions or topics you'd like us to cover? Reach out. We'd love to hear from you. Until next time, keep digging deep. Stay sharp, and remember, real value is built from the ground up. See you on the next episode.